The proposed merger of Mahindra Satyam and Tech Mahindra is welcome. It is the logical conclusion of a transaction inked in April 2009 when the Mahindra group acquired Satyam after its founder B Ramalinga Raju confessed to fudging the IT firm's books.

Existing shareholders of Satyam will get two shares of Tech Mahindra for every 17 shares held. The combined entity, with revenues of $2.4 million, will generate more value for shareholders. Share prices of both companies rose after the merger announcement.

The merger will give the combined entity a better shot at winning more and larger contracts, increase efficiency and reduce operational costs. Tech Mahindra was focused only on telecom , a sector where clients are cutting spends and forcing vendors to slash prices.

Its biggest client, British Telecom (BT), accounting for nearly a third of its revenues , has swayed its fortunes. The good news is that with the proposed merger, BT will no longer enjoy the same bargaining power and its revenue contribution will fall below 20%.

The merged entity will also have the full breadth of offerings and not be limited to one sector, telecom . For Satyam, a ship that was perilously close to getting wrecked three years ago, the turnaround has no precedent in India or the rest of the world, also considering the swiftness with which government acted and the auction through which it found a new owner.

So, distressed assets do have a market value. Now, the challenge for the combined entity will be to get large contract wins of $50 million and more that its bigger rivals are thriving on. The IT ingredients are there: enterprise business, engineering services and an understanding of the plumbing that makes all this run in today's connected world. The appetite and ambition to make it big is also there.

Tech Mahindra-Mahindra Satyam still needs to conquer the US, the world's largest IT market. US' contribution to revenue lags its peers, as does contribution from financial services clients - the ones with fat purses, who spend a lot on IT. The winning combination has been inked . Now it needs to strike gold.